Question

On October 1, Ebony Ernst organized Ernst Consulting; on October 3, the owner contributed $83,390 in assets in exchange for its common stock to launch the business. On October 31, the company's records show the following items and amounts. $ 1,460 Cash dividends Cash $13,210 12,300 2,720 Consulting revenue Accounts receivable 12,300 2,950 6,290 830 Office supplies Rent expense Salaries expense Telephone expense Miscellaneous expenses 45,910 17,350 7,970 83,390 Land Office equipment Accounts payable 640 Common Stock Exercise 1-18 Preparing a statement of cash flows LO P2 Also assume the following: a. The owner's initial investment consists of $37,480 cash and $45,910 in land in exchange for its common stock.. b. The company's $17,350 equipment purchase is paid in cash. c. The accounts payable balance of $7,970 consists of the $2,720 office supplies purchase and $5,250 in employee salaries yet to be paid. d. The company's rent, telephone, and miscellaneous expenses are paid in cash. e. No cash has been collected on the $12,300 consulting fees earned.

Answer 1

ERNST CONSULTING Statement of Cash Flows For Month Ended October 31 Cash flows from operating activities Cash received from customers Cash paid for rent Cash paid for telephone expenses Cash paid for miscellaneous expenses Cash paid to employees $0 -2,950 -830 -640 -1,040 $(5,460) Net cash used by operating activities Cash flows from investing activities Cash paid for office equipment -17,350 Net cash used by investing activities Cash flows from financing activities Cash investments from shareholders Cash dividends to shareholders (17,350) 37,480 -1,460 Net cash provided by financing activities Net increase in cash Cash balance, October 1 Cash balance, October 31 36,020 13,210 $13,210

Explanation: Cash paid to employees = ($6,290 - $5,250) Cash paid to employees = $1,040